PDVSA Begins Tender Offer for Cerro Negro Bonds
Petroleos de Venezuela, S.A. ("PDVSA") says that on November 29, 2007 it commenced a cash tender offer for any and all of the outstanding 7.33% bonds due 2009, 7.90% bonds due 2020 and 8.03% bonds due 2028 issued by Cerro Negro Finance, Ltd. in connection with the Cerro Negro extra-heavy crude oil project in the Orinoco Belt region. There are currently outstanding approximately $82.0 million, $350.0 million and $50.0 million in aggregate principal amount of the 2009 Bonds, the 2020 Bonds and the 2028 Bonds, respectively. The tender offer will expire at midnight, New York City time, on Thursday, December 27, 2007, unless extended or terminated by PDVSA.
In conjunction with the tender offer, PDVSA is soliciting consents of the holders of the Bonds to certain proposed amendments and waivers to (i) eliminate substantially all of the restrictive covenants and events of default in the indenture pursuant to which the Bonds were issued and the common security agreement and other financing documents related to the Bonds (other than arising from payment defaults and failure to comply with provisions of the indenture as amended or the Bonds), (ii) release all of the collateral and security interests securing the Bonds, (iii) eliminate certain other covenants in the common security agreement and the other financing documents, (iv) terminate the common security agreement and other financing documents, (v) waive any and all prior and existing defaults under the indenture, the common security agreement and the other financing documents, and (vi) rescind any prior or existing notices of default delivered pursuant to the indenture and the common security agreement. The consent of holders of Bonds representing more than 75% in aggregate principal amount of all outstanding Bonds will be sufficient to approve all of the Proposed Amendments. PDVSA has reserved the right to amend, extend or terminate the tender offer and consent solicitation at any time.
The tender offer and consent solicitation are being made pursuant to an Offer to Purchase and Consent Solicitation Statement, dated November 29, 2007 and related Consent and Letter of Transmittal. As described in more detail in the Offer to Purchase, the purchase price per $1,000 principal amount of Bonds validly tendered and accepted for purchase by PDVSA will be par plus a premium calculated two business days prior to the payment date based upon (i) for the 2009 Bonds, a fixed spread of 30 basis points over the yield of the 4.75% U.S. Treasury Note due February 28, 2009, (ii) for the 2020 Bonds, a fixed spread of 50 basis points over the yield on the 4.25% U.S. Treasury Note due November, 15, 2017 (or if there is an issuance of a 10-year U.S. Treasury security after November 29, 2007, based upon the yield of such security) and (iii) for the 2028 Bonds, a fixed spread of 50 basis points over the yield on the 5.00% U.S. Treasury Note due May 15, 2037, together with any accrued but unpaid interest up to but not including the payment date for the Bonds (or if there is an issuance of a 30-year U.S. Treasury security after November 29, 2007, based upon the yield of such security). The premium is approximately equivalent to 33% of the redemption premium that would be payable on Bonds of each Series under the indenture pursuant to which the Bonds were issued if such Bonds were to be redeemed. Holders must validly tender their Bonds on or before the Expiration Date in order to be eligible to receive the applicable purchase price.
Consummation of the tender offer and consent solicitation, and payment of the tender offer consideration, are subject to the satisfaction or waiver of various conditions, as described in the Offer to Purchase, including (i) the tender of Bonds representing not less than 75% in aggregate principal amount of all outstanding Bonds and the delivery of the related consents in the tender offer and consent solicitation and (ii) the compliance by certain holders of Bonds with their obligations under a lock-up agreement with PDVSA pursuant to which they have made a commitment to tender their Bonds and deliver consents in the tender offer and consent solicitation, subject to their right to terminate the agreement in the event of the failure of certain conditions or of a material breach by PDVSA. Such holders have indicated that they own (or represent the owners of) approximately 79% of all outstanding Bonds. Subject to the rights of the holders under the lock-up agreement, PDVSA has reserved the right to amend, extend or terminate the tender offer and consent solicitation at any time on the terms and conditions specified in the Offer to Purchase.
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